Looking at January results I am seeing talk of the competition for the “Crown” of volume king in sales for 2012. Will it be GM, VW or will Toyota come back and take the title. Who cares? You shouldn’t. This is ink fodder for the auto press, what matters is profit and in the long run, pricing will make or break profit.
Ignore the headlines on how many GM, VW or Toyota sold and look for the news on pricing, new or used. If you check Edmunds TCI chart, you see that of the US big six players, pricing has been stable – this is good – but take notice that Toyota and Honda are lurking in the bottom of the chart.
If you ask Toyota, Nissan and Honda who they fear will push for more volume with higher incentives, two of them (guess who) will say Nissan. The truth is that all three have plenty of room to fight back for some market share while GM, Ford and Chrysler don’t have much room to react and still remain below that $3,500 level of “sensibility.”
At the same time, as the WSJ highlighted today, used car prices are expected to rise 1.8% in 2012, after jumping 3% in 2011. retain their strength in 2012, In fact, according to Kelley Blue Book, used prices could spike as much as 5% for 2012 as supply continues to be tight after four consecutive years of ultra lean new car sales.
In Europe, Ford’s Q4 results highlighted the tough pricing conditions in a region where volume is on the precipice. There’s been a lot of chatter that VW has a laser like focus on ripping market share from the French and Italians with discounts across the board. January in France has been a bloodbath fueled not only by the year on year comps with no green incentives, but also a VW targeting cash weak PSA and RNO preparing for a B-segment changeover. Blogs are abuzz that the new VW UP can be PRE-ORDERED WITH A DISCOUNT!!!! Not par for the course with VW.
Takeaway: In the US, let’s watch for Toyota and Honda to slowly tick up spending, giving back some of their Tsunami pricing premium, hope Nissan stands pat and the Detroit guys hold the line.
If Nissan, GM or Ford start slinging cash; the euphoria over GM earning $10 billion this year will be short lived.
In Europe, the best I can say is cross your fingers and look for automakers with exposure ex-Euro.